EOT Position Update – May 30, 2012

| May 30, 2012

May 30, 2012

Market Snapshot

The markets pushed higher yesterday fueled by European sentiment once again.

For weeks now, it’s no secret that I’ve been very cautious on the market.  My current recommendations include options that are related to global uncertainty stocks or large cap bellwether stocks.

And it’s been working out great!

So now what?  Are things going to ever get better?

The answer is simple… It’s too early to tell.

The truth is, we still have a number of global and domestic issues to deal with.  And these are far from over.

For example…

A recent poll was posted showing more Greeks are in favor of remaining in the Euro. And for yesterday, this seemed to have a positive effect on the US markets, along with some stability in overseas trading.

In addition, China played its part in yesterday’s rally with reports of more monetary stimulus on its way.

The thing is, are these rumors or not?  We certainly can see the impact that rumors have on current market conditions.

As this news plays out, I believe that we continue to see a tug of war between optimism and pessimism.

And this will be based off news and reports on a day to day basis.

So, now our main focus turns to domestic data as well as the charts.

First, we don’t want to find ourselves being sucked into these reactions and make impulsive decisions. As you may know, we have some big U.S. economic reports out on Thursday and Friday. Namely unemployment reports, pending home sales, and a look at first quarter GDP.

Second, and more importantly, technically we’ve surged through some key levels of resistance.  In hindsight, these levels could’ve served as pivot points for the markets to roll over and continue downward.

But that hasn’t been the case… yet.

The bottom line…

Yesterday’s technical action is another reminder of why we must wait for confirmation.

The Dow Jones closed above 12,500 again, while the S&P closed above 1,325 and the Nasdaq above 2,850.

These aren’t bullish triggers per se, but an extension of a current bear rally.

There’s no doubt the markets have become reactionary to news.  So we’ll need to trust in the trends and use strategies that can absorb these reactions.

Let’s move onto the updates…

Position Updates

Just a quick note:  Remember, we won’t update every open position every week.  I try to focus on the positions that have some significant news or price movement.

  GLD June 2012 $154 Puts
Gold has been see-sawing its way through time.  But it’s still in a down trend and unbelievably continues to remain there.  It’s scary because every gold expert says something different on where they think gold is headed.  So, until we get some more clarity, aggressive investors are advised to hang on until we see a strong reversal in this shiny metal.  Aggressive investors are still sitting on a nice profit of 125%.Congratulations!  However, for now, hang on for the next support level of $140.

  DRYS September 2012 $2 Calls
DryShips has just survived its latest earnings announcement.  The report came in exactly how analysts predicted.  And the movement in the stock was only a few pennies.  Nothing to even speak about.  So now with earnings out of the way, I think DRYS will roll with the overall market.  And with an eternity until expiration, these options are a strong hold as I believe global growth will increase.  As a result, gains for DRYS.  Remember, we what this stock to rise in value.  Resistance is at $2.90 and $3.20, while support is at $2.10 and again at $1.90.

Category: EOT Update

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